2015 (5) TMI 482

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....nst the decision of the Income Tax Appellate Tribunal (ITAT) for assessment year (AY) 2008-09 (i.e. ITA No. 2001/Del/2012, decided on 09.09.2013): (i) Whether the ITAT was justified in the eyes of the law in treating the interest income of Rs. 77,25,153/- on the FDR's as part of its business income? (ii) Whether the ITAT was in error in allowing the business expenditure of Rs. 1,40,575/- as revenue expenditure? 2. The assessee company engages in business as builders and the developer. During the relevant period in the assessment year, it earned interest to the extent of Rs. 77,25,153/- on FDRs which was not offered for taxation; instead it was set-off with projects in progress. Holding that interest income was unrelated to the ....

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....ank out of surplus funds from the term loans received from financial institutions. As against the above, in the instant case, interest has accrued to the appellant on the bank FDRs after the commencement of the appellant's business. The said investment in bank FDRs was not out of surplus funds but for creating a Minimum Interest Reserve Account to service the interest burden on the above debenture as per the terms of the above Debenture Trust Deed. In view of the above, the facts in the instant case are clearly distinguishable. Considering the same, I find that the action of the AP in treating the impugned amount of Rs. 77,25, 153/- as income from other sources is not sustainable on facts or in law." The ITAT upheld the CIT(A)'s deci....

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....sent case where the utilisation of various assets of the company and the payments received for such utilisation are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee-company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction." 4. This Court, in Indian Oil Panipat Power Consortium Ltd v. ITO (2009) 315 ITR 255 (Del) held that where interest on money is received as share capital, and is temporarily placed in fixed deposit awaiting acquisition of land, a claim that such interest is in a capital receipt entitled to be set off against pre-operative expenses, is admissible....